Fight over tax breaks for Alaska oil producers heats up

JUNEAU — A political struggle over Gov. Sean Parnell's proposal to give huge tax breaks to Alaska oil producers is heating up, and prominent Alaskans are interjecting themselves into the debate to call for a more oil-friendly climate.

Parnell wants to expand oil-patch tax credits and cut tax rates in the hopes of spurring exploration and sending more oil down the trans-Alaska pipeline. He said he'll draw billions from state savings to make up any budget shortfalls.

Critics, including House Democrats, worry the state is rushing to give away too much with no promise of new oil production in return.

Administration officials acknowledged to the House Resources Committee this week that the changes from House Bill 110 could cost the state $2 billion a year.

Oil revenue is the lifeblood of Alaska state government. Steady declines in production have alarmed government and business leaders for years. Production has fallen by two-thirds from its 1988 peak of 2 million barrels of oil a day to just over 600,000 barrels a day.

The state expects to collect about $4.7 billion this year in oil revenue for general spending, and more than half of that comes from the tax on oil production profits at issue in the Legislature.